State Supreme Court asked to stay $17 million payout from LGC risk pool

CONCORD — The troubled Property-Liability Trust, a former subsidiary of the New Hampshire Local Government Center that administers property coverage for towns and cities, has asked the state Supreme Court for a stay on an order that the agency repay $17 million taken from members of a public health insurance risk pool.

Last year, LGC, after a lengthy hearing with its regulator, the state Bureau of Securities Regulation, was ordered to give the money back to members of HealthTrust, another former LGC subsidiary. The hearing officer, Donald Mitchell, ruled that the money had been improperly transferred from HealthTrust to subsidize a workers’ compensation program for about a decade.

The payment is due Dec. 1.

The problem, according to PLT Executive Director Wendy Parker, is that PLT doesn’t have the money for the $17 million payment.

“The $17 million is something we have been wrestling with for some time,” she said. “It continues to be difficult for us to comply with that part of the order.”

LGC, which was also ordered to split up its subsidiaries and pay back surpluses of $33 million to HealthTrust members and $3.1 million to PLT members, has appealed the order to the state Supreme Court, though it made the first two payments in August.

“I wouldn’t say it’s a desperate move,” Parker said of filing the stay request. “It is part of the process to get to the Supreme Court appeal. Asking for a stay is available to us and is the next step in the process.”

A previous attempt for a stay of the entire order was denied by the court last year.

“This has been litigated before when the appellate filing first happened,” said Securities Regulation attorney Andru Volinsky. The most recent stay request “is an interesting kind of hail mary.”

PLT nearly had an agreement with the BSR and the Secretary of State’s Office, which oversees the BSR, to bring in an outside insurance and finance expert, Michael Coutu of Rye, to facilitate the order and get PLT out of financial trouble.

The agreement fell through when the HealthTrust Board of Trustees, which as the payee of the order had to agree to the terms of the agreement, and Secretary of State William Gardner could not agree on whether Coutu would serve outside the authority of the board. Gardner said Coutu’s independence of the boards was a requirement, while board members said they would not abdicate their fiduciary responsibility to someone answering to the Secretary of State.

PLT attorneys argued in their request that the order could cause PLT to close its operations as “failure to stay the Final Order as to the $17.1 million payment would cause irreparable harm to PLT, while a stay would cause no corresponding harm to the New Hampshire Bureau of Securities Regulation (the “Bureau”) or the public interest.”

HealthTrust sent a letter to PLT, which is included in the stay request, saying it assented to the stay “because the specter of the Final Order’s direction to PLT to make a payment which would cause PLT to become insolvent creates significant risk of irreparably damaging HealthTrust’s own member relationships and market reputation,” HealthTrust attorney David Frydman wrote.

However, Volinsky said, some of the board members agreeing to the assent are the very people who got the program into this position to begin with.

“Some of them are members who voted in favor of these transfers,” he said.

Volinsky said the stay request is the first time he’s seen PLT acknowledge it could go out of business if it has to repay the money to HealthTrust. However, he said, PLT and other former LGC entities — the organizations voted to become separate corporations as part of a Sept. 1 reorganization — still haven’t acknowledged that the transfers were illegally made. And, he said, PLT continues to subsidize the workers’ compensation program.

“They’re still not telling their members that they’re losing money in workers’ compensation each year,” Volinsky said. “It would be appropriate for them to tell the whole story.”

Parker confirmed that PLT will be subsidizing the workers’ compensation program with $380,000 in this fiscal year, which ends June 30. She said the PLT board has recommended rates for the 2014-15 fiscal year that would result in the workers’ compensation program being self-sufficient. Those rates are scheduled to be approved Oct. 29, two weeks after an Oct. 15 public hearing for them, she said.

Parker said the PLT board voted to proceed with a stay request on Oct. 1.

“The board has been discussing its options for months,” she said. “Filing a motion to stay is one of the ways we’re approaching (the requirement to make the payment.)” The motion was filed Monday, she said.